The Guardian has noted this afternoon that:
Businesses will have to pay at least a fifth of the wages of furloughed employees from August, it has been reported.
The chancellor, Rishi Sunak, is expected to announce next week that employers will have to begin contributing as the lockdown is eased further, according to the Times.
Employers will be permitted to take furloughed workers back part-time, and all employers using the coronavirus job retention scheme will be required to make the payments, even if they remain closed, according to the paper.
I am not very surprised by this: it has been widely reported that Sunak has been fighting No. 10 on lockdown because the Treasury is petrified of the cost of keeping the economy closed. That said, the crassness of the move is to be wholly expected, and this needs explanation.
The logic of furlough was very straightforward. The intention was to take the cost of employing staff off employers, whilst keeping those staff in an employment relationship when their employer was forced, through circumstances beyond their control, to lay them off as they were unable to trade in anything approaching a normal fashion. Given that it was deemed necessary to lock down the country, and socially distance (and I believe that this was appropriate) then the logic of furlough was sound: it was an attempt to put people into limbo whilst preserving the capital of the companies that employed them.
Even with this arrangement in place, we know that many companies have suffered enormous losses, and have only survived because they have been provided with the loan facilities, backed by the government, to try to cover their cash flows as money has haemorrhaged from them to cover remaining overheads. Like it or not, this was the cost of maintaining the so-called free-market when only the state was able to preserve it.
But now, Rishi Sunak is running scared of the deficit, because the Treasury has told him that deficits are very bad things, even though they're not. And so he has announced that employers, who have not been told that they can trade again, and who have been offered no further funding, must now pay some of their staff's costs.
Why now? Because there is still time to start issuing legal notices on redundancy consultation for the beginning of August now: that's why.
And in many cases those redundancy notices are going to be given. Employers who have not been told if they can reopen as yet, and many more employers who are quite reasonably aware that demand for their services will be down massively when reopening happens because the services they supply are optional to other companies, in the sense that they represent expenditure that can be deferred, will have no choice when told that they have to pay their staff's wages again but make many people redundant. It will be that or face an inability to survive as a company as a whole.
This government is already, in my opinion, running a policy of herd immunity on coronavirus that accepts that a great many people will die from Covid 19. Nothing else explains their approach to a great many issues, like the failure to track and trace whilst choosing to reopen schools which will inevitably increase the R rate. I think they are indifferent to the cost: as Dominic Cummings put it not so long ago, grannies dying is just a price to pay as far as they are concerned.
Now the policy of pursuing herd immunity in the private sector is to begin as well: the cull of the jobs and companies that the government obviously thinks we can survive without will start.
I suspect that what might come to be called the great unemployment will commence. And the government will deny any responsibility for it, whilst putting no plan in place as to how those left without employment are to work in the future.
If this change to furlough had been announced alongside a commitment to a join guarantee in the Green New Deal it would make sense. But it has not. Furlough is to end, and with it millions of jobs, and there is no plan for anything else.
The reality of the coronavirus crisis for employees, and the indifference of the government to their plight, is about to become apparent to many. And the consequences may well be horrible, and totally avoidable.
So no-one please say Sunak is having a good crisis: when he's going to crash the economy in the absence of any plan for the future that's the last thing he's having. A great many people are going to change their minds about him very soon.
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There is an element to this beyond the deficit. The social contract is also at stake. There are currently millions of low paid essential workers continuing to labour on less than £20,000 a year while millions more are paid higher wages to sit in their gardens and walk in the park.
Everyone accepts that the furlough scheme was necessary but why would you continue beyond the point of the virus being in common circulation? If you want to use government spending to increase demand there are better ways of doing it than cementing the inequalities of the February 2020 labour market.
Three things
The second wave remains a very real risk
Second, I did nit say stick as it was
Third, I said we needed a GND to reform to the way it needs to be
Can you foresee yet another ‘Vote of No Confidence’ in the pipeline or is everyone just going to be forced to grin and bear it.
National Service, which I think may be hastily introduced in an attempt to solve the fruit picking may be a catalyst for such a move.
I foresee the 1922 getting very restless…..
Wait until they see their post bags…..
The way this government gets defended by the media reminds me of the Monty Python Piranha Brothers sketch.
Interviewer: they say he nailed your head to the floor.
Interviewee: well he had to, didn’t he?
It is the enormous incompetence of it all that is truly shameful. Each area is the same, there is nowhere for the modern day Archimedes to stand to move this particular world. Next comes Brexit. Leave when you can.
Wholeheartedly agreed.
You cannot retrain assassins to become socially conscious carers.
and then in just over six months the end of the transition period, probably with no deal in place.
Going ahead with that will surely get business to be very vocal in protest. Can they resist them?
Not going ahead will negate the reason they were elected.
They will be between the hammer and the anvil.
This looks like a useful idea Richard.
https://news.sky.com/story/coronavirus-split-three-day-week-proposed-to-get-uk-economy-out-of-covid-19-crisis-11993655
Might well just keep us afloat in the uncertain times ahead.
For some businesses it may work
Bit of a tangent so apologies there:-
Just finishing my first semester principles of economics course, touching on monetary and fiscal policy in the last two modules.
Basically hundreds of 1st years being coached that central bank interest rates fix practically everything, that excessive government spending will crowd out the ‘innovative’ private sector and that deficits adding onto govt debt will increase interest rates.
Crazy how this might be even remotely possible given the state of the economy!
Yet the same week I read this blog discussing I think £62 billion in bond sales and in the twittersphere the Bank of England selling a £1.3 trillion 34 year maturity gilt paying -0.003%.
Basically proving the exact opposite of what we are being taught.
My other three units this semester have all touched on neoliberalism and discussed its failure in geography, politics and sociology.
The real world seems to quite appreciate the security of govt debt and the failures of this ideology.
Yet for the building blocks of mainstream economics in the 21st C no one is being coached to use the tools that are actually needed to deal with serious crises. No one is being coached on the true role of money, of public debt and taxation.
It’s the same school of thought that leaves our elected representatives totally illequipped to deal with our present day reality.
Even Friedman said that it was in times of crisis that things change, that’s originally when the neoliberals collected together their loose ideas and brought them to the table.
It seems that students are just coached to regurgitate tired old ideas from the 70’s.
Kinda makes me want to scream!
So how do we get these tools that are ‘lying around’ out and put them to use?
Let me assure you that I was where you are in 1977
I thought I was being taught pure drivel – although it was micro I was most angry about because back then we still did Keynes
I rejected the thinking
I did not, as many on the right claim, give up on my economic thinking as a result. What I realised was that what was being taught was wrong and something had to be done about it
40+ years on I’m still trying
It’s a life’s work
But better to try than not
Keep going – because understanding their drivel is important to seeing the alternatives
Exactly this happened to me: my employer started the redundancy process, specifically citing the impossible costs of the revised furlough scheme when they would have no trading income to support that.
I am so sorry
Good luck
Thank you. Can’t really complain: my only time of significant unemployment thus far was brief and in the early 1980s when it was both survivable on benefits and not so degrading as it has since become. A new experience as I approach my 60s!
Well, when do small businesses have to tell the staff of impending redundancy? I had better find out. We are entirely tied up with tourism but are manufacturers of a sort. There isn’t any likelihood of much tourism for at least a year and it will probably need a vaccination before it starts to get going. I have a 50k loan which can be used to essentially keep us alive as a shell company. I will, of course, be looking for other opportunities but in the short term there is not much that can be done. How many people does the tourist industry sustain? Staycations may go up, (but not if there is another peak due to indecent haste) but overall the picture has to be very gloomy. How many will be flung on the scrap heap? As soon as the scheme was announced I feared that there would be no staggering according to when companies could get back to work. This is just an extra blow. If you are not trading how are you going to pay? You can’t the debts would mount up so quickly there would be no point in bothering. Other costs may scupper many businesses anyway. I spoke to several customers last week who were going for the hibernation option but many thought they would quit as there seems to be no move on rents. The rentiers must be paid in full even though that will lead to a loss of tennant and eventually no rent. Maybe I should give the 50k back before I spend it.
I can’t give advice that might appear to be on regualted issues here – sorry, but rules prevent it
I suggest a call to your accountant
I really wasn’t expecting an answer to my position. Really rhetorical. I was expecting maybe an idea of how many workers from the tourism sector could get the heave
Many more than appreciate it at present
Hello.
Please teach me similarities and differences between UK’s universal credit and JGP.
JGP?
JGP is Job Guarantee Program.
Please teach me similarities and differences between UK’s universal credit and Job Guarantee Program.
I think there are others better qualified to do that – sorry